How best to handle rental property that I can no longer afford the expenses on?

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How best to handle rental property that I can no longer afford the expenses on?

I have a rental property that is currently being rented. The rent does not pay the

entire mortgage and I am over my head. The house is in need of some major work but I have no money. It’s value is much lower than what I owe. I already got my payments lowered but it’s still not possible to handle.

Asked on September 8, 2016 under Real Estate Law, Massachusetts

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

There are no good options: if you walk away from the mortgage and let it go into foreclosure, the lender can still sue you for the balance left unpaid after selling the house and applying the proceeds against your loan. Since the house is underwater, and they typically go for even less than they normally would in a foreclosure sale, you could be looking at a considerable shortfall which you could be sued for. You could try to short sell the property--the lender may agree to take the short sale proceeds as payment in full of your obligations, but they are not obligated to do so; they could still hold you accountable for the remaining balance. If the property is not worth the mortgage, there is almost no way to get out of owing money; you may have  to short sell or let it go into foreclosure, then file for bankruptcy.


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